Venezuela, Russia to get together on oil

Thinking big: Venezuelan President Hugo Chavez says the Russians have offered him the chance to create an oil consortium that will be 'the largest in the world'

Venezuela and Russia plan to create a giant oil consortium to invest in joint ventures, as Moscow plans to challenge the dominance of Opec in influencing world energy markets.

"They've offered us the chance to create an oil consortium...the largest in the world," Venezuela's President Hugo Chavez said in Moscow.

He said the consortium would include state oil company Petroleos de Venezuela (PdVSA) and Russia's Lukoil, TNK, Rosneft and Gazprom.

Russian energy minister Sergei Shmatko said the country was seeking to increase influence over world oil markets and become a rival to the Opec cartel.

"Russia needs to take an active position on influencing the current market price of oil. There needs to be a Russian factor," he added.

"We keep talking about Opec...but we believe that we occupy such a high place in the world's oil community that Russia should emerge as an active factor."

Russia, supplying 12% of world crude, is vying with Saudi Arabia as the global top producer. Venezuela is fifth-largest producer of the 13 members of Opec.

The increasingly close military and economic relationship between Russia and the maverick Chavez is causing alarm in Europe and Washington.

President Vladimir Putin has made improving relations with Venezuela "a priority".

A Russian naval squadron is sailing to Venezuela, and two Russian bombers this month carried out air patrols over the Caribbean.

Venezuela said the oil joint venture would initially develop projects in Venezuela, before expanding to other Latin American countries.Chavez has proposed setting up a new bank – the PdVSA Bank – to raise capital to finance the projects.

He arrived in Moscow from Beijing, where he said oil exports to China could soar to a million barrels a day by 2012 from 330,000 now.

The two countries also plan to build four oil tankers and to construct three oil refineries in China capable of processing Venezuela's heavy, sulphur-laden crude.

"While the world enters an energy crisis, we are investing," Chavez said.

Venezuela regards energy-hungry China as a key part of its strategy of diversifying oil sales away from the US, which still buys about half of Venezuela's oil despite political tensions.

Other plans for co-operation with China call for building a refinery in Venezuela and launching an oil-development project in the Orinoco River belt.